up. spain up 4% last night. that's all you need to know. i always like to say there's a bull market somewhere. i promise tous? >> all right, jimmy. rising treasury bond rates signal a better economy and they are bullish for stocks. good evening, everyone. i'm larry kudlow. this is "the kudlow report." our top story right now, mitt romney comes forward to say he has paid at least 13% in taxes every year for the past ten year. plus he's paid huge amounts for charitable giving. you liberals take out your calculators. in 2010 he reported $22 million in income. at 13.9%, just over $3 million in taxes. what do you want from him? all that investment income, by the way, is double taxed. don't forget that. first as corporate income. then as capital gains.

so his effective tax rate is closer to 45% and he gave a fortune to charity on top of that. why do liberals keep harping on that. harry reid, wrong on this issue. ten-year treasury bond rates have gone up 50 basis points suggesting a slightly stronger economy, no recession. likely fed stimulus is not going to happen. and we have a rising stock market. so to wit, the dow up 85, nasdaq up 31, s&p up 10. and neil kashkari joins us. and calls to replace joe biden with hillary clinton. today, the vp meeting in the oval office with the secretary of state and president, then lunch with the president. is it all a show? new york times best selling author of "the amateur" ed

klein, my special guest to tell us what's going on. first up in his first remarks touching foreign policy since becoming mitt romney's running mate paul ryan was in manufacturing heavy ohio and had tough words for china's thievery of our intellectual property. he had tough words for the president. we go to ron mott with the details. >> reporter: good evening, larry. what a day this turned out to be on the campaign trail. we weren't expecting this much action but we got it. we'll start in south carolina where governor romney once again hit back at his attackers and the allegations that he paid next to no taxes over the last ten years. in a briefing with reporters he said he reviewed the last ten years or so of tax returns, found he and ann paid taxes every year and the least amount they paid was about 13%. the only campaign candidate stumping for votes today was

congressman paul ryan who stumped here in north canton ohio. paul ryan attacked the president saying he broke another promise by not doing anything about china on the trade front. listen. >> president obama promised he'd stop these practices, would go to the mat with china. instead, they are treating him like a doormat. >> speaking of ryan, one of the first things he said this morning was a jab at vice president joe biden. there were calls, including from senator john mccain that the president considered removing joe biden from the ticket and replacing him with someone else, maybe even including secretary of state hillary clinton. jay carney was asked about it. he said of all the people to get advice from on a vice presidential nominee he said is not john mccain. larry, back to you. >> many thanks to ron mott. poor john mccain. here is an interesting statistic. obama's ratings on the economy are significantly worse than all

three prior successful presidential incull bents at the same point in their first term. a full 60% of americans polled disapprove of the way the president is handling the economy. certainly not good news for obama, but all the more reason for romney and ryan to dispense with the distractions and make the economy issue number one on the campaign trail. let's talk a little bit about this. we have jonathan cowan, the third way president and cofounder. roger simon, media ceo, cofounder and author of "turning right at hollywood and vine" the perils of coming out conservative in

you've got joe biden talking about putting people back in chains which is a disgusting racial remark. you have harry reid talking about romney not paying taxes for ten years. another lie. another smear. do these guys ever have the class to say, i apologize? we were wrong? i went too far. is there any integrity left? both political parties at both times in many campaigns said things that are over the top. those things occurred in the democratic primary between obama and hillary and in a republican primary. the point is, as you said in your opening, these are distractions from the real issue. the real issue now by uh the picking of paul ryan which was a bold pick of a serious guy, right now the question on the

table is how are we going to get the deficit under control, do entitlement reform? romney decided -- not obama, not biden, not reid. romney decided that should be the central conversation by picking ryan. he made that inevitable. >> right. >> weigh in on this thing. >> i'll tell you. >> you just say anything you want on the left. anything you want. but you have one classy, smart young man in paul ryan. >> yes. it scares the hell out of the democrats now. he's the first person in my lifetime -- and that isn't short -- to actually talk about the issues to the american public. out's extraordinary. it will be a fascinating test. >> wait a minute. that's not exactly true. i think paul ryan is a smart and serious guy who put a bold plan on the table that i happen to

disagree with the important parts of the plan. he's not the only one. for example, there was the simpson-bowles commission and dick durbin. >> they weren't running for office. >> dick voted for the plan which was a bold serious plan. paul ryan did not. the point isn't to say did harry reid or joe biden or any of these folks say the wrong thing? that will happen throughout the campai campaign. >> hang on a second, jonathan. do not filibuster, please. we have two other participants and they are both smart guys. david limbaugh, is there a risk here that we are all getting hung up on the campaign trail with medicare and reforming medicare. i know that's important. i think the number one issue is the economy and jobs. and the 20% tax cut.

and the spending reductions. then we get to entitlement reform. is there a danger that romney and ryan will go off message, spend the next two help on medicare reform which is impossible to reform and get to the supply side economic growth measures? >> larry, e i think out's a false choice. we have to talk about both issues together. we have to cut discretionary spending radically. we are spending at trillion dollar deficits as far as the eye can see. we have $120 trillion in unfunded liability. we cannot handle it without economic growth. you have to look at pro growth policy with radical reductions in discretionary spending and structural entitlement reform. >> absolutely. >> we will not get the tea party energized if we don't address this debt. >> i agree. but roger simon, rom uh any has

20% across the board tax cut plus reform. he h wants to shrink spending to 20% of gdp from 24%. he believes we can grow the economy at 4% per year in his first term and create 12 million new jobs. what i'm saying is with the debate about health care, it's a complex debate, i'm concerned romney is not getting the messages out. i think they are great messages. >> it's a big risk, larry. this election will be a test of the american public. >> that's right. >> do they want to listen? david was spot on. these things are all part of the same picture. i don't have to tell you that obamacare means more unemployment. things like that. i think the public gets this more than they are giving them credit for. it will be a fascinating show. >> i agree with david and roger, larry, that this is now front an

center. the rom new people should have listened to you, larry, a while ago on this. but they have decided this is the conversation they want to have about entitlement reform. if they do it right, they can put democrats on the defensive. >> i'm in favor of entitlement reform. but -- about to sneeze. i want a reagan-kemp -- limbaugh, thanks. coming up, the dow's best day in weeks. jobless claims came in slower. out could put an end to the easy must be. rising long-term interest rates tell a positive story. i'll uh try to explain. we have pimco's neil cashcarry

to tell us what he thinks. is joe biden getting the boot from obama? ed klein, best selling author of "the amateur" is hearing whispers from inside the white house. don't forget, folks, free market capitalism is the best path to prosperity. i'd like to see some reagan-kemp growth rhetoric. we'll be right back. ♪ ♪ [ male announcer ] its lightweight construction makes it nimble... ♪ its road gripping performance makes it a cadillac. introducing the all-new cadillac xts.

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all right. stocks had their best rally in over two weeks today. the real story is the big rise in ten-year treasury bond rate. stay with me on this. let me try to explain why. first of all, let's have a picture of this thing. from about 1.35% it's risen all the way up to 1.85%. these are historically low rates, but it is a big 50 basis point move. in this game with ultra low rates, that's huge. i want to raise this point with you. number one, the reason the long-term rate is rising is because the economy is not going into recession. i know not every number is

right. the philly fed manufacturing index fell today. basically retail sales are improving. industrial production is improving, housing is improving. i'm not saying a boom. probably 2% growth but it's not a recession. therefore, the long bond continues to rise in yield. it's very important. second point i want to make is because the economy is stronger, because the bond rate is signalling that, uh think the chances of federal reserve stimulus are receding. that is to say if it is a better economy they don't have to do this. i don't want them to do it in the first place. that's my basic take. overall, if uh you see a rising long-term bond rate -- i wish it would go to 3% or 4%. that would be a booming economy. it's a good thing, not a bad thing. my final point is you can get out our calculators and charts and you will see during this period of the rising bond rate the stock market went up, too. do you know why?

stocks like growth. as i said again, this is a growth signal. stocks like growth. treasury bond rates going up are all about growth. now, not everybody believes this. let me bring in our friend, the managing director and head of global equities at pimco, former assistant treasury secretary. neil, you know more than i do about this, but i think the treasury bond rate move is significant. what do you think? >> i would add one more factor. the markets are starting to believe mario draghi when they say they will help italy and spand in the near term. people can move to other asset classes. all of these things are happening at the same time. >> all right. basically you would say these are good things.

maybe some relative normalcy in europe or stability. relative normalcy in the united states. we are not going to fall off a cliff. we are not going to have a double dip. we are not going to have the worst case scenario. >> in america or to the ecb lend lending in yumplt -- europe. we have big challenges to tackle. >> we have fiscal problems, tax problems, spending problems and entitlement problems. i agree. let me ask you another thing. your colleague -- and we have interviewed him here, i think the world of bill gross. he's down on equities. you have a global view. are you shying away from equities or are there places where investing in stocks makes sense including perhaps the usa? >> we are absolutely investing in equities every day, buying different equities around the world including the usa.

bill said returns for both equities and bonds are going to be lower in the future than i they have been in the past. but equities are going to outperform bonds in the near future. so we absolutely are buying and investing in equities. here at home in america and around the world. >> let me ask you. jeremy siegel says 17,000 on the dow. i know that's a big number. he's a historian, neel. what do you make of it? could we go to 17,000 on the dow? >> i don't want to say out's impossible. we have to focus on the factors that drove the markets. equities and bonds the last several decades. we are levering up the u.s. economy. corporate taxes kept going down and down. corporate profits kept going up. we think you need to be more realistic about the returns that are possible. we think stocks can be attractive for long-term investors.

>> around the world. you know, larry, we don't care where a company is headquartered. we care where it is doing business. we often buy stocks in america because they have exposure to higher growth markets. >> neel kashkari, thank you very much. we appreciate your input as always. we have another story that might be moving the markets. there are reports out, whispers, that president obama is dusting off his old plans and an oil reserve lease. strategic petroleum reserve. now to cnbc contributor addison armstrong of tradition energy. i'm not sure i really understand this. we are awash in oil. inventories are high. the saudis are pumping out 10 million barrels a day. we have been in a trading range for both gasoline and oil. what are you telling me here? >> well, you know, you're right on the inventory story. the trading range, i think, is getting a little bit -- you know, we're pushing it.

today was the first day since may that heating oil, gasoline, brent crude, wti, all closed at the lowest levels since may. interesting to me that the announcement came out today of all days. i will say i think there is a good element of jawboning going on here. the whole idea of the spr release was to put more pressure on iran in the run-up to the embargo against imports to europe. what's happened is the oil price has gone up tremendously since may. brent is up 20%. wti up 23%. the iranians may sell less oil but it is a higher price. >> well, that's very unfortunate. what about the saudis pumping 10 million and what about our fracking and oil pumping and sunday we'll have a keystone pipeline? we're going to be awash in oil and natural gas.

>> the administration has to be careful that it isn't seen as an election-year move. >> you're right about that. a lot of people will be annoyed at that. you're right on the money as always. thank you very much. >> thank you. >> up next, speaking of the election, the 2012 election is big money. we are only in august and already both sides have spent half a billion dollars. as much as the entire 2008 election. details when we come back. you're watching "the kudlow report." please stay with us. you know why i sell tools? tools are uncomplicated.

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we're still committed to seeing this through. new numbers are in. campaign spending on radio and television advertising has crossed the half billion dollar mark. cnbc's brian shactman joins us with more on that and all the latest breaking headlines coming into the cnbc newsroom. greeng. half a billion. >> call it the citizens united impact. thank you very much. with the numbers as they stand, 37 million spent this week on political advertising. and the super pacs. total spending now at $512 million. about the same amount spent in the entire 2008 general election. there's more. almost half of that comes from super pacs and the majority of that in support of mitt romney. the gap, the company where you buy the clothes, owner of old

navy, banana republic, net profit up last year. younger shoppers spent more and the company raised outlook shares. up in after hours trading. apple closing at anal all-time high of 636.34. robert did the math. shares rise up. apple breaks above $600 billion. patients using defibrillators should check for abnormalities. stock is down on the day. finally this, an l.a. restaurant offering a 5% discount -- not to seniors, but to customers who leave the cell phone with the maitre' d. >> i thought you were going to

say they were going to give discounts to people who voted republican. i could have sworn. >> in l.a. they would make them pay 5% more. >> brian shactman, thank you. coming up on kudlow, is vice president joe biden getting the boot for his racially charged "chains" remark? that's what our special guest hears. ed klein, author of the best-selling book "the amateur." he's straight ahead. [ thunk ] sweet! [ male announcer ] the solid thunk of the door on the volkswagen jetta.

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welcome back to "the kudlow report." i'm larry kudlow. in this half hour, the white house strongly denies it, but there are whispers that vice president biden might get his walking papers before the dnc convention is over. wow. new york times best-selling author ed klein has inside information. he joins me later as my special guest. also, the iowa deli owner who may have delivered food to the obama campaign but he sure didn't cater to them. his t-shirt for the president to see, government didn't build my business. i did.

you're going to meet this courageous small business owner in just a few minutes. first, 137 days and counting. that's how many days america has before falling off the fiscal cliff. but there just might be some hope. a force to be reckoned with on capitol hill. now, here's what the newly minted running mate said today on a campaign stop in las vegas. >> the president has given us deficits every time. more borrowing, spending, more taxing, more regulating and if he's re-elected, it will be more of the same. we are not going to let that happen. >> the question is, is the romney-ryan ticket the key to writing the fiscal ship? if they do when i know the white house, how fast can they get the job done? we bring in two veterans of the

house, dick gephart and dennis hoster, republican from illinois. both of you honor me. thank you very much. you heard paul ryan blame the democrats, really more in the senate. they have had plenty of votes in the house. can that log jam be broken if they take the white house? >> well, it can be broken, no matter who win it is white house. if the next president, whether it's obama or romney, really leads on this and works with the congress as we did with bush one and bill clinton and dennis hastert and newt gingrich in the '90s to get bipartisan majorities to get rid of the deficit. >> a lot of people agree but regard it as a bygone era.

d denny, you presided over a lot of deals. >> i think most members of congress want to get things done. people are tired of finger pointing. it's this guy's fault and that guy's fault. i think people realize the key is getting things done. it can't be all one way or the other. when the leader and i were there we didn't always agree with each other. very seldom agreed but we found a middle way to get things done. we had different ideas on how to do things. we found a way to get it done. that was the important thing. >> dick, i remember you as a pro growth tax reformer. tax reform is part of it. your party just wants to raise taxes on the rich. of course the republicans are going to oppose that. of course romney and ryan will

oppose that. why can't people find common ground on tacks starting with extending the bush tax cuts. >> we can and we did. when ronald reagan was president, jim baker was treasury secretary. that administration work with bill brad ley and myself, tip o'neal. we got tax reform done when somebody thought it could be done. tax reform is hard, just like getting rid of deficits is hard. no matter what anybody says, they resist tax reform, but it can be done. we got the top rate down to 28%. we lowered the rate on capital gains. we made a real step in the right direction. they can do that again now. >> you had an economic boom having gone through that. it was absolutely fantastic.

tennis, do you have to divide and conquer, take a separate tax piece and vote on it, a separate spending piece, a separate defense piece? is that how it has to be done? say romney comes in and he's got his man, ryan. i will talk about ryan in a second. in order to get something done in the first, i don't know, 30, 60, 100 days before the markets melt down and the economy melts down, do you have to divide and conquer each piece separately or can you do it in one omnibus bill? >> i i think it has to be the omnibus bill or procedure. you say, this is what we have to spend. right now our spending rate this year is 48%. out of every $2 spent, $1. we have to expand the tax base. everyone can agree on that.

then we have to agree, what is that number? what's the gdp number we have to look at and what's the percentage and how much do we have to spend? then you back off and find the rates in the numbers and there is going to be a legitimate political debate on how to determine that and where the burdens go. at least you have a target. once you have a target, you can build to it. >> dick, a question here. this is a political question. you have paul ryan. very interesting. because of his stature, he knows the policies. sounded to me on "60 minutes" that mitt romney said paul ryan will be the leader on fiscal and budget policy. because of ryan's experience, 14 years on the hill and lately on the budget committee will he be a better guy to put things

together? could he change the story? >> everybody has to help. vice president biden carried on long negotiations in the last year on the budget. they didn't get it there. they didn't get it done. he was very active, as paul ryan could be. it takes everybody. it takes whoever is president and it takes every member of congress. this is something i want to emphasize. when we did this with bush one in the '90s, we spent six months with all the members going over every cut, every spending cut in that budget. this is hard work. let me tell you something. at the end of the day, none of the cut actions are popular politically. so you've got to get a bipartisan majority who i intellectually understands what you're doing and is willing to vote for it together. >> go ahead, sir. >> that's the strength ryan

brings to the table. he understands the process. he's a student of it. not everybody agrees with everything he has to say. if you have the understanding then you put different pieces together. >> this is a partisan question. don't you think mitt romney's background in business and finance makes him a better, more hands on -- >> capital has to be raised. how to make a payroll. >> dick, in all fairness, because i have known you so many years, i give you the last word. >> i think president obama showed in the last four years he's willing to go way, way past where his real positions are in order to get a bipartisan agreement. >> all right. >> he couldn't get it done. i think he would in a second

term. >> thank you. we're honored. uh i appreciate it very much. coming up, former morgan stanley vp garth peterson sentenced moments ago. he tells us exclusively how he'll go to prison because of president obama's war on business. plus the president's ridiculous "you didn't build that" statement is coming back to bite him on the campaign trail. we'll talk to the deli man who catered president obama's visit yesterday but wore an angry message for the president. how interesting. -[ taste buds ] donuts, donuts! -who are these guys?

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one small business owner in davenport, iowa, has given president obama a taste of his own business after the president's "you didn't build that" diss. when the president's press corps came to the deli yesterday the co-owner served them in a bold pro-romney t-shirt. here now is ross live from iowa wearing the shirt. show that thing off. i think it's terrific. give me the whole -- there you go. look at that. what's your message? what were you trying to tell the president? >> well, i was trying to tell him i didn't appreciate his comments. feel that he had not much understanding of what a business owner does. financial risks we take, the type of personal sacrifices that we make when we start our businesses. so i wanted to kind of be out front. i felt this was a great venue to do it. >> do you work all day, 24/7?

>> no. these are manageable hours. we work 8:00 to 6:00, you know, ten hours a day type of thing. >> you started this thing? >> yeah. my business partner and i started it just about five years ago in november. >> did you tell the president that? >> no. i didn't have a chance to speak with president obama. just the press corps that took a keen interest in my shirt. >> oh. but obama was in there. was he in the store? >> no. we actually catered off site to where the press corps was. but we weren't sure if president obama was going to be there or not. but, you know, regardless, i was going to be donning my shirt and, you know, giving a silent message to all who were there. >> you were making your statement. i'm happy to advertise your statements and i'm sure other media outlets are, too.

>> thank you. uh-uh prea i appreciate that. it's been a wild 24 hours. >> thank you, sir. good luck in your venture. good luck in government didn't build my business. i think you're 100% right. a news alert. listen to this. oracle is paying $2 million to settle charges with the s.e.c. the company violated the foreign corrupt practices act because a subsidiary in india kept money off the books and used it to make unauthorized payments to phony vendor. a former morgan stanley vice president has been sentenced to jail time for violating the same act. he says the law is politically motivated and is a sham. cnbc's own scott cohen joins us now with the details. good evening. >> reporter: good evening. garth peterson doesn't say it's politically motivated but he has problems with the way the law is being enforced. the feds made a big deal about

the case when peterson pleaded guilty as a show of force how serious they are about enforcing the foreign corrupt practices act. peterson could have faced five years in prison for brokering a deal that made a chinese government official richer on paper. instead he got nine months in prison when he was sentenced today. he's speaking to us and says that the way this case was handled doesn't get to the heart of the problem when out comes to foreign bribery. >> the department of justice and the s.e.c. maybe to a lesser extent are so keen on finding some example that they can get by the scruff of the neck and say, see, remember this law, nobody do this again. the doj needs this example to hang up like this and they are getting it at the expense of

truth. >> morgan stanley cooperated with the government. it says mr. peterson's intentional sir couple vengs of morgan stanley's internal controls was a violation of our values and policies. what does peterson think about the controls and the business environment in places like china? we have more in our exclusive interview on cnbc.com and a lot more to come tomorrow morning on "squawk box." >> up next, is hillary waiting in the wings as vice president joe biden gets the boot for his racially charged chains remark. that's what our next guest is hearing. he'll clarify. ed klein, author of the new york times best-selling book "the amateur" is next. the book is number two on the list. you've got to hear this. ♪

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♪ your ticket to a better night's sleep ♪ the country is not as divided or obsessed with gaffes or some stray remark as washington is. what joe biden was talking about, again, is an example of a substantive argument, a

substantive issue the american people should be concerned about. his phrasing is a distraction from what is at stake. >> well, that was president obama defending his veep, joe biden. but some believe because of the vice president's repeated blunders, the democratic ticket might get swapped out. how about obama-hillary? could it happen? joining me is an expert on this one. edward klein, author of the new york times best-selling book "the amateur." it's back up to number two on the list. welcome back, ed. >> thanks. >> swapping out? is such a thing possible? >> just before we went on the air tonight i checked with my sources in the clinton camp and i took notes. i wanted to be careful. here is what they told me. up until just a couple of weeks ago, the white house was putting out feelers to see if hillary would accept the vice presidential nod and replace joe

biden. bill clinton was, i'm told, urging his wife to accept the number two slot. he saw this as a great launching pad for her for running in 2016. but then hillary had lunch in the white house a couple of weeks ago with valerie jared. michelle's best friend, senior adviser to both the first lady and the president. >> just about the biggest lefty in the white house. >> that's right. she told valerie she would not accept the vice president spot. the lunch was ostensibly about other matters, but it came up. the vice presidential thing came up. hiary felt burned out after four years as secretary of state. but i'm told there were more important reasons for her not accepting. >> such as? >> number one, she felt that if she were on the ticket with obama and he lost she would be

tarred as a loser when she tried to run in 2016. on the other hand, if she was on the ticket and he won, and he continued his far left wing socialistic policies she'd have to defend those policies when she ran in 2016. >> out's already tough enough for her to defend the foreign policy. >> exactly. >> let me get that. two weeks ago, white house staff put out feelers to hillary about a going on the ticket as vice president. >> that's right. >> hillary then didn't make a decision immediately? she -- >> she knew she was having lunch with jarrett. >> but not with president obama. >> the president has never spoken to hillary about this. he's afraid if he makes such an offer and she turns it down, bill would leak the story. he doesn't trust bill clinton. >> he shouldn't. bill clinton disagrees with him

about three-quarters of the way. valerie jarrett was carrying the freight for the offer. >> exactly. >> did michelle obama talk to hillary clinton? >> no. you can assume if valerie jarrett is speaking to hillary clinton, michelle obama, who is connected at the hip with valerie knew all about it. there is one caveat. if obama gets in desperate straits and romney and ryan pull way ahead of him and he and bill clinton team up and put pressure on hillary, there's still a -- >> they only have 20 days, registration process and so forth. it has to happen fast. >> that's right. >> you are convinced then that hillary was offered the position? >> she was not offered it like, here's the position. but it came up in conversation. it was very clear that they were saying to her, would you accept this. she said no. >> has valerie jarrett, and i

will use her as a proxy for obama. i think that's fair. >> certainly. >> has valerie jarrett and obama just given up on joe biden with all the miscues and most recently the racially charged miscue? have they just given up? >> i think they are stuck with him. i think they have to go with him, unless, as i say, bill and obama can team up on hillary and say, you've got to do this. she does not want to do it. he would like her to do it -- her husband. but i don't think she will. >> do you think there is a possibility that with biden taking the traditional hatchet man role as a vice president is deliberately smearing people including this remark, they are going to put you all back in chains -- meaning romney. that's an incredible racial smear. is it possible that's actually part of obama's negative campaigning and that biden is doing his bidding? >> i ask you this question. if paul ryan went to danville,

virginia, and said, here in north carolina, we're going to win the election. in other words, he didn't know where he was, and then said, we're going to put you all in chains, ryan would be off the ticket tomorrow. >> place would have gone crazy. >> absolutely. >> there is a double standard. >> yes. >> where is the media? where's obama? who is saying, you can't say that? there is no place for that in american politics. >> i'm sure they have had a talk with him. i don't think it will do any good with joe biden. >> can they muzzle him? keep him home? >> i don't think so. they need him for the white, working class vote. >> which i think paul ryan is going to snake out from under him. >> uh i agree. >> can you imagine the ryan-biden debate coming up? at the moment things are still in flux. hillary is still out there, but it doesn't look like she'll enter the picture. that's your bottom line.

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